AMES, Iowa---Comfortable, cool days and evenings in June hardly make a homeowner think of high utility bills and taxes – but according to Mary Yearns, ISU Extension housing specialist, this is exactly the time to think about energy efficiency and – the time to act!

Replacing inefficient windows and doors, heating and cooling equipment and insulation can decrease energy bills and make a home more comfortable. With the federal tax credits and utility company energy rebates, Yearns says the benefits go beyond lower utility bills. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes in federal taxes.

“Homeowners cannot afford not to take advantage of the federal tax credits available for energy efficiency improvements,” said Yearns. “Investing in home improvements now will pay off for a long time to come. Besides the decrease in energy bills, tax credits will help pay for the new products. Some local utility companies also offer energy rebates for becoming more energy efficient.”

The Stimulus Bill (American Recovery and Reinvestment Act of 2009) made significant changes to energy efficiency tax credits. Yearns recommends a visit to www.energystar.gov/taxcredits  for a list of improvements and specific products that qualify for the tax credit. Some general statements can be made about the tax credits:

• They are available at 30 percent of the cost, up to $1,500 for property placed in service in 2009 and 2010 – for existing homes – for windows and doors, insulation, roofs, HVAC, water heaters and biomass stoves.
• They are available at 30 percent of the cost, with no upper limit through 2016 – in existing and new construction – for geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells placed in service.

But Yearns warns – there are more specifics to keep in mind before purchasing products, if homeowners are counting on the tax credit.

“Some products, like gas furnaces, must be a specific make and model to qualify for the tax credit,” said Yearns. “Installation of some products is covered under the credit, but not all. Homeowners should refer to the chart on the Energy Star page and follow the links to product specifications and details.”

As an example, the Energy Star chart notes, “For insulation to qualify, its primary purpose must be to insulate; insulated siding does not apply. Adding insulation to your home is covered.”

To receive the credit, taxpayers must complete a 2009 IRS Form 5695 (which will be available late in 2009). Yearns recommends keeping the product receipt and the Manufacturer's Certification Statement, a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit, with other tax records.

She says the tax credit is worth the time spent researching the specifics and completing the paperwork. Combined with potential energy company rebates, the return on this investment will be noticed for a very long time.

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